Carbon Tax

A carbon tax is a policy instrument that imposes a fee on the carbon emissions coming from the production of various goods and services. Carbon taxes have the potential to cut greenhouse gas emissions by encouraging both reductions in fossil fuel use and greater uptake of renewable sources of energy. They do this by internalising the environmental costs of greenhouse gas (GHG) emissions for businesses and individuals, thereby creating a financial incentive for them to reduce their carbon footprint and adopt cleaner technologies in order to avoid the tax.